Cash airlift helped avert Greek bank run during debt crisis: paper

Published March 03, 2013

Reuters

ATHENS – Greece's central bank had billions of euros of banknotes shipped in from other central banks to avert a bank run during the country's debt crisis as depositors withdrew their money, newspaper To Vima reported on Sunday.

Fears the debt-laden country might ditch the euro and return to the drachma led Greeks to pull out billions of euros of savings in the last three years, stashing their cash under mattresses or in safe deposit boxes.

"While many talked about a lack of liquidity in the economy, the cash circulating ... had no historical precedent," the paper said, citing central bank officials it did not name.

Central bank officials could not immediately be reached for comment.

Cash in circulation jumped to 48 billion euros ($62.32 billion), about a quarter of gross domestic product (GDP), in June 2012, from 20 billion before the crisis erupted, way above normal ranges of 6 to 8 percent of GDP in developed economies, the paper said.

To meet the high demand for cash, the Bank of Greece had loads of banknotes secretly airshipped from abroad, feeding it to banks throughout the country to avoid shortages that could have intensified worries and set off a bank run.

The Bank of Greece only prints 10-euro banknotes.

Greek banks lost about a third of their deposits after the debt crisis exploded in late 2009. Without access to wholesale funding markets, they came to depend on the central bank for their liquidity needs.

However, uncertainty has decreased over the country's future in the euro zone after a second round of elections in June last year, which led to a three-party pro-bailout coalition government and a return of deposits to banks.

Official data released last month showed 10.4 billion euros had come back to the system. Business and household deposits stood at 160.9 billion euros at the end of January. ($1 = 0.7702 euros)